In 2009 the U.S. federal government enacted tax credits aimed at encouraging consumers to purchase plug-in hybrid electric vehicles (PHEVs). These tax credits are available to all consumers equally and therefore do not account for the variability in social benefits associated with PHEV operation in different parts of the country. The tax credits also do not consider variability in consumer income. This paper discusses why the PHEV subsidy policy would have higher social benefits at equal or less cost if the tax credits were offered at different levels depending on consumer income and the location of purchase. Quantification of these higher social benefits and related policy proposals are left for future work. (C) 2009 Elsevier Ltd. All rights reserved.